Luke Thompson
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Luke R Thompson (born August 13, 1984 in Trenton, New Jersey), an American, while 18 and a sophomore at Babson College, was sued by the Attorney General of Massachusetts, Thomas Reilly, along with his company Mainline Airways LLC, a tour-operator, in June 2003, for selling bogus travel deals. The publicity of the suit was exacerbated greatly by the defendant's age; while initially a local story, a day later the lawsuit instantly became a worldwide headline once the fact that Luke was 18 years old was put in a June 12, 2003 press release. In fact, the story was so big that news of screen legend Gregory Peck's death was pushed to page 2 in many newspapers. Following the lawsuit, Thompson remained enrolled at Babson College uninterrupted to complete his B.S. in business and master's degree in accountancy by May 2006.
On June 13, 2003, Thompson made front-page headlines internationally. According to the Trentonian, the local newspaper in Trenton, NJ (near his home in Lower Makefield, PA) that made Mainline a cover story 2 days running when the suit was filed, media heavyweights including Diane Sawyer attempted to lure him into studio interviews, but Thompson never gave a single interview or made any appearances. Developments in the lawsuit and the suit's subsequent withdraw failed to make even local headlines.
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[edit] Mainline Airways
[edit] Company
During a short period prior to the lawsuit (during May and early-June 2003), this company headed by Thompson sold "pre-reservations" on flights that it claimed would be chartered between Los Angeles and Honolulu beginning in July 2003, for as low as $89 one-way. However, taxes and hefty fees added to this price significantly, and most dates only had availability at much higher rates, at or above those of competitors' published fares. Also, the fact that the company was chartering the aircraft and not operating the flights themselves as an airline was hidden deep into the contract terms on the company's website, leading to rumours of illegitimacy that attracted the attention of the state attorney's office, who quickly filed suit against the company ex parte.
The amount of sales that were in escrow at the time the lawsuit was filed and returned to customers when plans for the service were postponed indefinitely was never publicly disclosed by either party to the lawsuit, but thought to be between anywhere between $200,000 and $5 Million.
From communication between Mainline and airport officials during the planning stage in 2002, the company relayed intentions of operating its own leased aircraft, older wide-body L1011's refitted with new interiors featuring leather seats and TVs at each seat, a copy of the business plan of successful JetBlue Airways, who was not a competitor in Hawaii. However, this proved a daunting project, and in February 2003, the plan was axed to chartering the flight from a supplemental air carrier's DC-10 or A330 aircraft. Later, but before pre-reservation sales begun in April, cutbacks already begun: leather seats were abandoned and "TVs at every seat" now meant portable DVD players for each passenger, and the "free cocktails" promise was severely restricted and barely mentioned. Mass confusion and allegations of fraud against the company resulted from it not taking any steps towards the 6-month FAA certification process, while flights were to begin in 3 weeks when the lawsuit was finally filed. The company failed to notify the airports of its change of intentions from starting airline service to only the chartering aircraft and selling seats, and the fact that flights were to be chartered was not prominently displayed on their website.
Before Thompson closed it in June 2003, the website had indicated that a handful of flights during the company's first week of proposed service in July 2003 had actually sold out and reservations could not be made. While the company was not advertising at the time of the lawsuit, Thompson says word-of-mouth was bringing in droves of customers when they expected to not receive any or minimal bookings prior to advertising. Thompson stated the company was about to begin an expensive ad campaign focused on radio.
The route the company planned to serve (California to Hawaii) has high traffic volume, but at the time few deeply-discounted fares from competitors, and Thompson sustains that the market was overpriced at and potentially "a very profitable charter route with the opportunity to sell high-margin vacation packages in the future."
According to IRS tax records, Thompson's company Mainline Airways posted a substantial loss in 2003, including $12,000 of call centre expenses and forfeiture of a $20,000 deposit on an aircraft charter contract. Thompson reported that he was thankful that the company had not yet begun to advertise when the suit was filed so losses were mitigated. He also conceded that advertising for the project was behind schedule, that it was likely that plans for the charter would have been deferred due to the those delays which would have resulted in under-sold flights, and that customers buying seats on dates prior to the new start date would have been rebooked if that action was taken.
Mainline Airways was incorporated as Mainline Airways LLC in Pennsylvania on December 12, 2002. No declaration has been made by Thompson or any other company official if or when Mainline Airways LLC will resume operations and in what capacity; the corporation remains in active status three years after it discontinued sales and operations. Thompson stated in 2005 that if he starts a similar operation in the future, it will likely be an international route from the eastern United States.
[edit] Frequent Flyer
The company had no loyalty plans in place when it folded, but indicated plans to launch one on its website called "SkyBridge," a program where an annual membership fee of $299 per person would entitle platinum members a flat-rate, non-capacity-controlled, $109 one-way coach or $199 business class fare on any California to Hawaii flight, no matter what the advance purchase or current fare, or $149 per year for gold-level membership, offering a higher flat rate of $139 one-way plus taxes and fees and a free business upgrade for every 4 flights flown in a membership year.
[edit] Investigations
The United States Department of Transportation, the regulatory agency overseeing tour operators opened an investigation against his company Mainline Airways in 2003 and took no action.
However, in June of 2003 Massachusetts Attorney General Thomas Reilly filed the well-publicized state lawsuit against Mainline and Luke Thompson alleging that the company would not perform the travel services paid for by customers that were to be executed beginning only 3 weeks after the suit was filed, and Reilly expressed a general concern that the company was nothing more than a fraud and Thompson was laundering large amounts of cash from the company. It was later revealed that the funds were actually protected in a company escrow bank account containing all monies received from customers to hold their reservations. The dollar amount held was never released to the public, but thought to be between $200,000 and $5 million.
Reilly's lawsuit had sought to shut down the company, obtain refunds for all customers, and $605,000 in punitive damages from both Mainline and Thompson, but it was partially withdrawn in September 2004 and Thompson was not forced to pay a fine or damages.
[edit] Fallout after State Lawsuit
Shortly after the suit was filed, Thompson declared that his company was suspending its plans to begin chartering flights due to "bad press created by the lawsuit", cancelled all “pre-reservations” and issued refunds due to the cancellation. The company had maintained the funds collected from customers so it was able to issue refunds quickly. Mainline Airways says it had planned to re-book passengers on Delta Air Lines, with whom the company had matching schedules and rebooking agreements in the event that the planned charter flights were cancelled or deferred. However, most customers had already put stop-payment orders on their credit card transactions after hearing the press accounts of the lawsuit, and the company did not have sufficient capital to pay for both refunding and re-booking customers, leading to the decision to purely refund customers.
Delta Air Lines had modified its schedules in April 2003 and added Delta flight 1852 and 1579 to presumably copy Mainline's proposed charter, with Delta flight 1852 matching Mainline's planned 8:55PM Honolulu departure exactly to the minute. Delta even made the departure time change by an hour during daylight saving changes to match Mainline's daylight saving departure time adjustment, rather than allowing the hour to affect its arrival time like all other Delta flights. Approximately a year after Mainline cancelled its plans, Delta replaced the flight with one at another time and no departure time adjustment and recycled the flight number.
Over a year after the suit and Mainline discontinued operations, on September 2, 2004, a settlement was reached and approved between Luke Thompson and the state, providing that no party admitted wrongdoing or liability, and for no fines or other penalties would be paid Thompson or Mainline; the state had originally sought $605,000 in fines. While Thompson was not fined anything, he agreed that he would be fined $5,000 in the event that other terms of the settlement are violated, including if refunds provided over a year earlier were somehow not completed or the company engages in the of pre-reservation charter sales in the future where the name of the airline operating the service is not revealed at the time of purchase. The settlement formally ordered Mainline to refund all customers, but refunds had actually been provided in June 2003, only the company was not under court order to issue refunds until their settlement was approved (just over a year later).
Prior to the settlement, Thompson and Mainline filed an answer indicating over 30 defences and over 10 counterclaims alleging improprieties and perjury in documents filed with the court to obtain a restraining order restricting sales as well as misrepresenting the terms of the order in the plaintiff Thomas Reilly's press releases, which incorrectly stated that Reilly had froze the company's assets and obtained an order to refund customers. The actual restraining order issued by the court did not order either of those actions and Thompson and Mainline demanded restitution for those errors. The settlement released all parties from liability and neither Mainline, Thompson, nor Reilly admitted wrongdoing of any kind.
[edit] Previous Businesses
Thompson had started a dial-up Internet Service Provider (ISP) in early-year 2000, prior to his 16th birthday, called WorldOne Internet; the company also operated as Dialup California and Lighteningweb. Thompson's ISP's partnered with American Express internet access in December 2000, reducing the company nothing more than a reseller. The subscribers were integrated and the company stopped business after December 31, 2001.
In 2001 at age 17, Thompson established Graduation Trips Inc., a predecessor tour operator to the famed failure Mainline Airways. This company sold group vacations to graduating high school students for travel to Florida and the Bahamas. Due to the depression in the travel industry at that time, the company had short-lived, cut-rate contracts (reportedly up to 80%) with companies including Airtran Airways, OurLucaya Resort and Radisson Deauville Resort, and offered low prices attractive to budget-minded students, yet according to Thompson still had a profit margin above 50%, unheard of in an industry of razor thin margins.
